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How to Refinance Your Home Mortgage

In tough economic situations, it becomes extremely difficult to make payment on your home mortgage without any delays. With constantly rising interest rates, meeting your monthly mortgage installments may become tougher than what you have expected. If you find yourself in such a tough situation then it might be a time to consider refinancing. But the real danger in refinancing your home mortgage lies in ignorance. Without appropriate knowledge, refinance may hurt you financially, by increasing interest rate instead of lowering it. Here are some useful tips on refinancing home mortgage which will definitely help you to achieve best possible deal available in the market.

Refinance to Cut Your Mortgage Payments

Refinancing your home mortgage at slightly lower interest rate will help you to reduce your installments thereby saving you thousands of dollars in long term. Lowering your mortgage installments means you can invest your savings in any of the suitable investment products to multiply your money. Though refinancing your home mortgage could result in longer term of a loan, it can save you significant amount over the period.

Refinance to Cash out the Home Equity

It’s a very ideal proposition to cash out some part of the home equity by refinancing the home. It can be an effective financial move in tough financial circumstances. For example, it makes much sense to cash out appropriate part of your home equity to start a new business or purchase a new property. It mainly depends on your long term financial goal and whether you are capable of managing your all the debts responsibly.

Can Refinancing Help You to Achieve Your Goals?

Before taking an important decision of refinancing your home mortgage, make a proper list of your financial goals. Ask yourself some very important questions like – Do you wish to pay off your mortgage immediately and get rid of debt faster? Do you want to reduce your monthly home mortgage installments? The person who can give answer to all these important questions is nothing but you.

Identify Processing Fees and Closing Costs

Depending upon what kind of loan you are opting for, you may have to compensate hundreds of dollars in the form of additional fees. So, it is extremely essential to take entire processing fees and closing costs into consideration. Sometimes, it may take a decade or more in order to recover the overall cost of refinancing so it is extremely crucial to recognize your ‘break-even’ point and plan according to that. If you are planning to shift to some other location in near term, then it doesn’t make any sense in refinancing your home mortgage at all.

Opt for an Upfront Mortgage Lender

Most of the Upfront Mortgage Lenders (UMLs) available in the market disclose their processing fees upfront and you can shop anonymously without entering much personal information to mortgage lender. This makes your refinancing process extremely less stressful and it also help you to get away from refinancing solicitors. However, before selecting your mortgage lender, make sure to verify all the credentials of the company. Remember to check whether the terms and conditions given by mortgage lender are up-to-date with the current regulations.

Don’t Over-Emphasize Your Mortgage Payments

What you owe is more important as compared to what you pay every month. Most of the times, it is extremely easy to get tempted by lower monthly mortgage payments. So make sure to consider some other important aspects like long term cost and extended payment period.

Can Refinancing Reduce Your Debt?

Refinancing can save you significant amount money in long run by lowering your monthly payments but it can’t happen quickly. It can’t get you rid of your existing debt because it just restructures your debt. So it is extremely crucial to weight your savings against the period it will take to recoup your refinancing cost which usually ranges from 3 to 5 percent. There is wide range of refinance calculators available on the internet which can help you to such kind of calculation.

Utilize Your Negotiation Power

As there are so many mortgage lenders available in the market, which are providing low interest rates, you will definitely get strong negotiation power to fetch the best deal. Federal law mandates mortgage lenders to offer you a detail estimate of the fees which they are going to charge you. By analyzing this estimate properly, you can get rid of some unnecessary charges such as wire transfer fees, rate-lock fees and documentation fees to lower the overall cost of your home mortgage.

Consider Loan Mergers

Refinancing helps you to consolidate your other home equity loan with your existing loan. This lets you to save significant amount of funds by allowing you to pay single rate on the overall amount instead of lower payments on your primary loan and higher on other mortgages.


Real estate and debt management experts believe that for homeowners refinancing mortgage is effective idea but there is high risk to consider at present situation. A borrower’s credit situation, the age of his current mortgage and his job prospects everything should be considered before taking the final decision of refinancing home mortgage. Rely on your own assessment of your existing loan relative to the recent quotes which you have obtained and analyze all the numbers properly to determine which loan makes more sense considering your both short term and long term financial goals.

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